Why we’re building that new terminal at McCarran

Randall H. Walker, director of the Clark County Aviation Department

Tuesday, Aug. 10, 2010 | 2:01 a.m.

In August, Brian Greenspun turns over his Where I Stand column to guest writers. Today’s columnist is Randall H. Walker, director of the Clark County Aviation Department.

These are unprecedented times, and McCarran International Airport has not escaped the tough economic conditions that have buffeted Southern Nevada, the United States and abroad.

People I meet frequently mention the massive Terminal 3 project under construction along Russell Road. Given today’s environment, some wonder why McCarran is expanding when fewer people are flying to Las Vegas. It’s a reasonable question. But the explanation is equally reasonable, and some of the details may surprise you.

Terminal 3 — or T3, for short — was proposed a decade ago with the support of the airlines that generate much of McCarran’s income. Until recently, airlines couldn’t wait for McCarran to add gates that would enable them to operate more flights. In fact, less than three years ago experts from the Strip to Wall Street publicly questioned whether McCarran could accommodate the additional passengers needed to support this community’s then-booming travel industry.

But things changed quickly when oil prices skyrocketed in mid-2008, followed immediately by the Great Recession. Near the onset of what’s become the worst economic malaise in generations, I appeared before the Clark County Commission in July 2008 to seek direction on Terminal 3’s future. And make no mistake, our elected leaders faced a difficult decision.

One option was shuttering a $2.4 billion project — causing job losses for nearly 1,800 residents — to postpone expenditures until conditions improved. By then several airlines had withdrawn their support, suggesting T3 be shelved due to their own financial concerns.

The other choice was to keep building, ensuring that McCarran would be prepared when the economy recovers and travel inevitably grows. The commissioners chose this course, stating it would be “a disservice to this community” if T3’s summer 2012 opening were delayed.

History puts that reasoning into perspective. From 1990 through 2007, passenger counts rose more than 150 percent, topping out at nearly 48 million. McCarran now ranks among the world’s busiest airports, and for years it has strained, processing more customers than its infrastructure was designed to accommodate.

However, McCarran cannot continually serve 40-plus million travelers without expanding. Las Vegas has added more than 11,500 hotel rooms since McCarran last added space in 2008. The community has grown, and so must its airport.

Exceeding customers’ expectations is critical. Las Vegas relies on leisure and convention travelers, none of whom is obligated to return. Travelers who associate a city’s airport with overcrowding or unwieldy delays are more likely to take future trips elsewhere.

Airports from Atlanta to San Jose, Calif., are investing heavily to expand and modernize. Local businesses have spent billions of dollars to attract visitors; those investments would quickly unravel should McCarran leave a negative impression. Failing to maintain an attractive, modern and efficient airport would unquestionably cost Las Vegas visitors.

Travelers are also increasingly diverse. McCarran and the Las Vegas Convention and Visitors Authority have for years pursued more big-spending international guests. Those efforts have been successful. In 2005, foreign airlines carried 1.1 million passengers here; by 2009, the total had risen to 2.2 million, or nearly 6 percent of McCarran’s overall tally.

To keep those foreign airlines happy — and to attract more international flights — the status quo won’t suffice. McCarran’s existing port of entry is antiquated and undersized, offering just four gates. T3 will bring six international gates, allowing greater service during high-demand periods. It will also include an expanded U.S. Customs and Border Protection facility to process arrivals more efficiently. Without these improvements, it would be hard to grow the international market.

Building during a slow economy also brings unexpected benefits. While developing Terminal 3, Clark County has seen significant competition from interested contractors, with many offering better bids and a deeper pool of skilled laborers than were available during the area’s recent building boom. Terminal 3 is on schedule and on budget, clearly benefiting from construction talent that in prior years would have been divided among dozens of other projects around town.

Also, thanks to the efforts of Senate Majority Leader Harry Reid and members of Nevada’s congressional delegation, the American Recovery and Reinvestment Act of 2009 temporarily halted the Alternative Minimum Tax (AMT) on airport bonds. The market for AMT bonds was frozen last year and McCarran could not otherwise have raised the capital needed to continue T3.

Additionally, this relief reduced the normal AMT penalty and lowered borrowing costs. This will save McCarran approximately $80 million through reduced interest payments, which is critically important because the Aviation Department is a self-supporting enterprise fund that receives no tax revenue from Clark County’s general fund.

McCarran will soon be positioned to welcome travelers from across the globe into a new, world-class terminal. That’s why McCarran is investing for Southern Nevada’s future while looking ahead to brighter days that are sure to come.